From traps for the unwary to the problem of hubris, there are many reasons why an OTT business can fail. These are some of the more common OTT challenges.There has never been a better time to launch an OTT service, as ultra-fast broadband networks are laid across the world, and mobile technology starts to embrace a delivery format in 5G that can deliver high quality streaming video.
But, while it is tempting to see OTT almost as a license to print money and a business plan that can’t fail based on the success of Netflix and other SVOD players, there are many traps for the unwary. Some are obvious, some are subtle, but there are a growing number of failures being left by the side of the road as more and more companies pile into the OTT space. Here is a very brief guide into avoiding the most common pitfalls.
6 OTT Challenges
Some of the following may seem obvious, but the growing list of failed OTT companies suggests that not all these issues were carefully thought out.
1. Misunderstanding your audience
You need to know who is going to be watching and what they might want to watch. This is particular important when it comes to niche channels, which can be guilty of two things: either targeting too narrow a niche or entering a niche space that is already over-crowded. There are only so many viewers to go round and these in turn only have so many hours in the day to watch content.
Service stacking is becoming more and more commonplace, with the US in particular happy to accommodate up to 2.8 services per household. But assuming that one of those services will be one or more of the big SVOD players, the competition for the remaining slot/s is fierce. And, as the headline of that article suggests, the US could have reached the limit for SVOD stacking.
In his entertaining post Whistling Past the OTT Video Graveyard. Parks Associates’ Brett Sappington lists a few failures. Fandor and FilmStruck chased the over-crowded cinephile market and struck out; while overly niche specialists such as Hortus TV targeted gardeners and XtraFrame provided live access to bowling events, both failed to achieve lift-off.
Do your research and be certain of your audience. To be honest, some of the proposals out there are perhaps more suited to starting life as YouTube channels rather than fully-fledged OTT services. Certainly, despite all the issues with the YouTube model, the opportunities for monetization are perhaps easier there.
2. Using the wrong technology
There is a right way and a wrong way to do all this from a technology standpoint nowadays. The right way is to leverage the power of the cloud. It has been over three years — a lifetime in the current TV industry! — since Netflix CEO, Reed Hastings, turned on the streaming giant’s global service, but nothing illustrates the power of the cloud better; one press of a button during a presentation at CES and 130 new countries joined the service at a stroke.
This is, in a nutshell, what the cloud provides: the power to scale quickly and efficiently without the enormous capital expenditure of relying on on-premises equipment. There really is no other rational business plan in play anymore.
3. Showing the wrong content
This is a part of the first two points ― giving your audience what they want to watch and by leveraging (utilizing) TV business analytics. Big Data, as it used to be called (the industry much prefers the term ‘analytics’ now ) provides invaluable insights into what parts of your content library are working and what parts are not. These analytics offer invaluable insights into what needs to be deleted from your library because it’s simply sitting there racking up server costs, and what is worthwhile keeping around and will still attract viewers many years into the future.
Content is going to be one of your largest expenses; you need to make every minute and every GB count. And, it goes without saying, you then need to protect it as well.
4. Offering a poor user experience
One of the issues operators face in launching a new OTT service is that the competition is, essentially, Netflix. The Netflix user experience has been refined over the years to be an ultra-efficient means of connecting customers with content swiftly, employing personal recommendations, exemplary user interface design, and seamless support across multiple platforms. The good news is that you don’t have to invest the same R&D budget to develop it; the bad news is that your customers will demand something similar. Luckily there are off-the-shelf options nowadays.
Obviously, this approach extends all through an organization to customer service; the user experience is not just limited to interaction with a screen but any and all contact with a company, whether that be an email to technical support, an account query, a Twitter request or something else. And as part of this, we’re also going to list some barriers to entry. You need to make it easy for people to sign up. Long contracts, heavy fees, a lack of payment options…all these can conspire to ensure that you never attract enough subscribers to thrive. Speaking of which…
5. Catching a bad wave
Anyone who’s surfed in the ocean, or even thought about surfing, will understand that not all waves pick you up and carry you to the beach; some fade to nothing around you leaving you paddling in open water. Transactional VOD, for example, was considered to be the next meta-trend in the industry, but has been constantly out-performed by the subscription model time and time again.
As with anything, there are tides and there are trends. Services aimed at the 3D market and the VR market have failed, ones that have looked at esports have grown rapidly. Trying to second guess which way the OTT market will develop is very much like playing the stock market; the rewards are potentially great, but then so are the risks.
6. Managing expectations
This is an internal problem, but no less of an issue because of that. Because some companies have made successful investments in OTT operations, it doesn’t necessarily follow that all will. Nor indeed, that a company will be as successful and show returns as quickly as its investors want. Netflix’s share price is still incredibly exposed to shifts in subscriber numbers growth, with any underperforming quarter seeing it punished in the market.
Brett Sappington points out that companies can achieve success in subscriber numbers and still be killed off because the internal expectation was so much higher. “Canadian service Shomi, reached just under one million subscribers but was closed by parent companies Shaw Communications and Rogers Communications. DramaFever was closed by WarnerMedia (after previously being acquired by Warner Bros.) with executive statements that it just wasn’t able to achieve the success necessary for the new company.”
Solving the Common OTT Challenges
While the opportunity that OTT represents is extraordinary, but it’s also an increasingly crowded marketplace where companies need to get the fundamental basics right ― before launching services. Some of the solutions are technical, such as use of the cloud and the employment of data analytics, some of them are simply good business practices and apply to any field.
OTT is not a gold rush and this is not the Klondike circa 1897. There is money to be made and audiences to be had, but you have to do more than just turn up with a product and expect the money and viewers to start rolling in. You need a good plan and you have to serve up engaging content at the right price then give the product time to scale. Even then, after an initial flush of success, the period that is meant to herald sustained growth can still be a nervous one for all concerned.